Fintech funding in India shows resilience in Q3

Written by Kapronasia || October 25 2023

2023 may end up being a year that many fintechs want to put behind them. With interest rates high, inflation stubborn and the global economy a tad wobbly, it has not been the best year for fintech funding, even in Asia Pacific, where so much of the fintech development story has been taking place in recent years. That said, funding has been more resilient in India than in many other markets, especially in the third quarter of the year.

Data compiled by Indian research firm Tracxcn show that Indian fintech startups raised US$436 million in the July-September period. While that marks a sharp 55% decline from US$967 million during the same period a year earlier, it is an increase of 68% on a sequential basis from US$259 million in the second quarter of the year.

Is this the beginning of a turnaround? It is hard to say. We would hesitate to jump to any conclusions. That said, the most interesting story here is that both more mature and early-stage startups are still being funded adequately as late-stage rounds rose 141% on a sequential basis to US$326 million, though down on an annual basis from US$471 million, while early-stage rounds raised US$101 million, up 107% sequentially but down 76% on an annual basis.

Overall, India ranked fourth globally in terms of fintech funding with alternative lending, regtech and banking tech seeing the most growth among industry segments. One of the most notable deals of the third quarter was the US$50 million raised by Credgenics, an online service that helps banks collect on debt, that tripled its valuation to US$340 million. Credgenics will use the money to expand to Southeast Asian countries including Vietnam and Indonesia.

Another interesting data point: No unicorns were minted in the third quarter, while there was one new one during the same period a year earlier. We would expect that this trend would continue for some time. So many fintech startups (and not just in India) are overvalued, some to an extreme, because they achieved their valuations in the frothy, low-interest rate, easy money days of what now seems like yesteryear. It is no longer easy to reach a valuation of US$1 billion just because you claim to have heaps of customers and a plan to revolutionize some aspect of financial services.

Meanwhile, Sequoia Capital, one of the biggest players among India’s fintech investors has been affected by a defamation lawsuit and governance issues that were first reported last year. As it turns out, the closing of a $2.8 billion fund was delayed due to a governance issue. The Silicon Valley firm struck more than 400 deals from 2017 to mid-2022 and had invested US$5.5 billion in India as of June 2022, far surpassing U.S.-based rivals like Accel and Lightspeed, data from Venture Intelligence show.

In June 2023, Sequoia announced it was spinning off its China and India/Southeast businesses and rebranding them. The latter is now known as to Peak XV Partners; Peak XV was the original name given to Mount Everest.